Some of the wealthiest people in India have minted their money in the real estate sector. However, that doesn’t mean that this is an easy place to invest and get wealthy in. There are numerous do’s and don’ts that go with the real estate business and you need to do your homework wisely before entering into this arena.
Investing in stocks and bonds may require investment in 4 figures, but investing in real estate gets to be more capital intensive and needs financing in six figures for it to be lucrative. And that’s not all. Aside from the capital invested in property, you need another add-on capital cushion for emergencies that arise in a typical lifetime. If you aren’t ready with an add-on cushion, then you might end up selling your investment property prematurely due to cash crunch, and that might not always prove to be profitable.
Investing in property can also turn out to be a lucrative retirement income plan as incoming monthly rent can be used as living expenses. Aside, from this factor, the value of the property itself would have gone up with time, making this a great strategy for building wealth.
So if you have the capital and the time and are ready to take the plunge into investing in property, here are a few tips that might prove useful:
- Do your homework thoroughly by learning as much as you can on websites, blogs and forums dealing with real estate investments.
- As with any other business, you need to have a solid plan to help you succeed and to your destination.
- Before going in for investing in property, make sure you don’t have other outstanding loans as it could result in your being unable to get another loan to finance the new property.
- The best scenario of course would be not having to take any loan at all and putting down the full payment. This is because loans taken for over long periods of time may have changing interest rates which could result in your paying more than initially planned. A fixed interest rate on the loan might be better.
- When it comes to choosing the property, do a thorough background check, both on the paperwork as well as the builder/owner. It’s always better to take the help of a property lawyer at this stage so there are no loopholes for problems to creep in.
- When buying a home for investment purposes, it’s better to go for a low-cost home; the higher the cost of the home, the higher the processing charges, taxes and maintenance, so experts always suggest a low-cost home.
- The location of the property is very important as good neighborhoods in safe, peaceful middle-class areas with good schools not too far away, are more preferred by renters. Easy access to nearby facilities like shops, hospitals, bus stops and schools increases the chances of getting renters as well as increasing the value of your property over time.
- Finally, you should be realistic with rent charges and start on the lower scale before increasing over time. When calculating the rent, remember to include your EMI payments as well property taxes, insurance and maintenance.